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ANALYSIS OF SEPTEMBER 16, 2008 CAV OPINIONS

[Posted September 16, 2008] The Court of Appeals gives us two published opinions in domestic relations cases today. One relates to a spousal support award, and the other deals with equitable distribution.

Brandau v. Brandau, alas, presents a familiar scenario – well-to-do self-employed professional husband leaves stay-at-home wife after 22 years of marriage. The wife had taken care of the couple’s two children while the husband earned the family’s keep as an optometrist. When the younger son was about to finish high school, the husband walked out. The wife had a congenital heart condition that impaired her ability to work (in addition to the fact that she had a high school education and had been outside the labor market for two decades).

In responding to a support request, the husband asked the trial court to make an allowance for the wife’s income-earning capacity. He adduced evidence from a vocational specialist that wife could earn about $14,500 a year; she countered with a vocational expert of her own, who said she couldn’t make more than about $13,000. The husband, who took in $190,000 a year, contended that even with the lower figure, she should still be tagged with imputed income that would reduce his support.

The trial court declined to make that adjustment, holding that there was no duty on the part of the wife to go out and secure employment immediately, as soon as hubby walked out. The court entered a support award, noting that the amount of support could be changed later if one party or the other showed a change of circumstances. Today, the Court of Appeals affirms, holding that the trial court didn’t abuse its discretion by refusing to immediately impute income. That isn’t to say that husband can’t go back after a couple of years and make the same request; but for now, the wife keeps her award.

There’s a separate legal issue here, relating to the husband’s income from his optometric business. The husband had regularly given money to his children from the business, and had listed them as employees, so he could claim the payments as business expenses and not pay taxes on them. Even husband’s accounting expert conceded that this was an improper deduction; these were gifts, plain and simple. Accordingly, when the husband appealed the trial court’s refusal to reduce his income for those figures, the Court of Appeals swats this argument aside, calling it “wholly meritless” and “not fairly debatable” (and directing an award of appellate legal fees to the wife for having to respond to it).

If you can believe this, it gets worse for the husband’s attorney. In his argument on imputation of income to the wife, he cited an unpublished CAV panel opinion. My long-time readers will know that that’s a no-no; unpublished opinions of the Court of Appeals have no precedential effect, and it’s basically a waste of paper and ink to cite them. But its not enough for the court to call the lawyer on the carpet for citing impotent caselaw; the court notes today that even that panel opinion was vacated, and its majority holding reversed by an en banc ruling last month. In the lawyer’s defense, I’ll point out that the en banc decision was almost certainly handed down after the lawyer filed his brief, and probably after oral argument in this case. But the order granting en banc rehearing (which vacates the panel opinion) came down way back on February 29, and it’s overwhelmingly likely that the lawyer could have seen that before filing his brief here.

The other case decided today is McIlwain v. McIlwain. This one comes from the opposite end of the income spectrum; husband appears to have been the kind of guy that your mother warned you not to marry. He worked not; he cooked and cleaned not; he basically hung around on the computer for the dozen or so years the parties shared a home. He did receive about $8,000 a year from a trust, and had some real estate that didn’t net any rental returns. He also, according to today’s opinion, owned two businesses. But even these produced little or nothing to support the couple.

Husband was productive in one respect: He managed to crank up a lot of unpaid taxes (the devil within me is prompted to muse, “For what? The Sitting-Around-the-House tax?”). In fact, he simply declined to pay the couple’s personal income taxes for years (despite telling her that he was taking care of it) by filling out and filing the returns, but never attaching a check.

We all recognize that Reality is going to crash this party soon; the tax man will eventually get you. When wife found out what was going on, she drew down an account that had the couple’s savings (mostly from the sale of four homes they had owned over time) to pay most of the taxes. The trouble was, by that time, husband had also drained $160,000 of the savings to “lend” to his businesses. (Later in the opinion, he argues that the loans were worthless because they exceeded the value of his financial empire. You can get an idea from this just how lucrative his business ventures were.)

When wife found out about the “loans,” that was the last straw; she moved out shortly thereafter, leaving husband to live rent-free in the marital home (which by that point had no mortgage). Wife paid to live in an apartment while the divorce dragged on and on and on . . .

. . . and on and on, eventually ending in a final decree almost six years later. In the decree, the trial court, at wife’s request, the court credited her in the equitable distribution analysis with half the fair rental value of the marital home during the six years. The trial court reasoned that husband had “benefited from exclusive occupation of the marital residence at virtually no cost since August 1, 2001,” and the wife had to pay for her own housing. In light of the circumstances, the trial court found that inequitable. So does the CAV; it affirms the trial court on this ruling, rejecting husband’s argument that such a credit cannot predate the divorce decree. (Technically, it finds that it wasn’t an abuse of discretion to rule that way. But it is not heard at all to read between the lines here, and conclude that the appellate court is cheering the trial court on as it metes out a measure of justice to the couch potato wannabe.)

There are two other rulings, but they’re straightforward applications of well-established ED doctrines. Husband objected to the trial court’s treatment of the “loans” to the businesses, contending that that money came from his separate property. The trial court held that he had failed to trace these monies to his own property, and the appellate court affirms, since the money had commingled in a joint account. The husband wins a small victory in a reciprocal application of the tracing requirement. The trial court had awarded wife a credit for $23,000 of her own funds that she used to pay down the tax bills, but the appellate court finds that, this time, it’s the wife who hasn’t satisfactorily traced the funds to her own property. The case is remanded for a recalculation, which will probably result in the wife getting half that credit and the husband getting the other half. But overall, the wife is the prevailing party in this appeal.

Having now posted analysis of two ugly divorce cases, back to back, I feel compelled to add the following: In case you’re reading this, Sweetheart, please know that I love you dearly, with all my heart. Signed, Your Devoted Husband.